Aurionpro Solutions Ltd (ASL) is a global leader in enterprise security, digital innovation and banking solutions and a provider of IP led IT solutions for the Banking, Financial Services and Insurance (BFSI) segment. The company provides solutions to corporate banking, treasury, fraud prevention and risk management, Internet banking, governance and compliance. They provide a balanced portfolio of Product Suites, Domain Focused Implementation Services and Outsourced Product Development. The company is headquartered in Mumbai. Their clients include more than 100 banks across the globe. They are having a market cap of Rs 256 Crores. Aurionpro has consistently been recognized amongst the top 100 technology solutions providers for Financial Services companies.

Core IP centric businesses of Aurionpro Ltd.

Table 1: Business Verticals of Aurionpro Solutions

Businesses Products
Enterprise Security
  1. Identity and Governance
  2. Fine-grained Entitlements Authorization
  3. API Security Services
  4. Advisory Services
  5. Access management
  6. Isla – Malware Isolation Solution
Digital Innovation
  1. ACE – Aurionpro Customer Engagement
  2. Digital Payments
Industry Solution –Banking & Fintech
  1. Smart Lender for Loan Origination
  2. iCashPro for Cash Management
  3. Financial Supply Chain Management
  4. Government and PSU
  5. Logistics Solutions

Details of Demerged Businesses

The demerged business is engaged in providing consulting and has also developed solutions which are available on cloud and on SaaS, and PaaS models. The following business verticals fall under the said consulting and solution providing business on cloud and on SaaS and PaaS models.

  1. Consulting including investment in Aurionpro solutions SPC Bahrain and Auroscient Outsourcing Limited India.
  2. Interactive Customer Communication (Interact DX). It is one of the product that comes under digital innovation.
  3. Supply Chain Solutions (Logistics) including investment in Aurionpro SCM Pte limited. It is offered through industry solutions.

Please note: The demerger business relates to core segment which provide consulting services available on cloud, SaaS and Pass Models.

Aurionpro-Demerger-Trejhara-IT-Services-1

Table 2: Revenue Contribution (All Fig. In Rs. Crores)

Line of Businesses FY 2017 % to total FY 2016 % to total
Core Business
Enterprise Security 243 38% 290 41%
Digital Innovation 196 31% 165 23%
Industry Solutions –Banking & Fintech 126 20% 121 17%
Non-Core Business
Industry Solutions –Govt 73 11% 26 4%
IT Services 108 15%
Total 638 710

Aurionpro sold its IT Services business in USA to Saicon, in March 2016, so that they can focus and grow its three core IP centric businesses.

Please note: There is promoters pledge holding of Rs 51.96 Crores, in percentage terms it is 59.12%.

Board of directors in their meeting held on 9th May 2017, approved the scheme of arrangement for demerger of non-core businesses of the company into Trejhara Solutions Ltd., a WOS of the company.

Before this demerger, the company acquired various companies related to its core business:

  1. Cyberinc, a subsidiary of the company, has signed a global OEM partnership agreement with HPE for powering Isla, its advanced web malware isolation systems. It continues to accelerate the expansion of Isla web malware isolation system powered by HPE as its OEM and GTM partner.
  2. Cyberinc partners with OvationData to launch Isla Cloud Malware Isolation to defeat advanced cyber-attacks in UK. OvationData will offer an advanced cyber security solution which will be available as a “turn-key” service from OvationData’s state of the art secure network operations centres.
  3. ImageWare Systems and Aurionpro Enter Three-Year GoVerifyID OEM Agreement. This agreement Brings Multi-Modal Biometric User Authentication to the Self-Service Kiosk Banking Business.
  4. Aurionpro acquires Spikes Security, adds Cyber Security capabilities. The new subsidiary of Aurionpro will aim to offer full and comprehensive client-centric enterprise security solutions.
  5. Aurionpro Signs Strategic Agreement with ForgeRock, Strengthens Enterprise Security Practice. Aurionpro will now offer clients access management, fine-grained entitlements and application programming interface (API) gateway-based solutions based on the ForgeRock platform to help them secure their enterprises.

From the appointed Date 1st April 2014, it amalgamated Intellvisions Software Limited with the company Intellvisions Software Limited (hereinafter referred to as ‘Intellvisions’), a provider of innovative Smart Kiosk Technology that offers self-service digital interactive solutions. Smart Kiosks, as part of digital customer experience solution will be an additional product line to Aurionpro’s innovative offerings. Intellvisions product offerings include Queue Management Systems, Digital Signage Solutions, Customer Feedback Systems and Self Service Kiosks for a wide range of functions including Cash and Cheque Deposit Automation, e-Governance Kiosks equipped with a variety of peripherals.

Trejhara Solutions Ltd (TSL) was incorporated on 10th March 2017, and it is engaged in the business of providing IT and IT enabled services and software solutions which are available on cloud and on SaaS (Software as a Service) and PaaS (Platform as a Service) models.  Post demerger, equity shares of TSL will be listed on BSE Limited and the National Stock Exchange of India Limited.

Please note: Currently there is no business activity in this company.

Valuation

Table 3: Net Asset Value (NAV) of Demerged Business as on 31.03.2017(All fig. in Rs. Crores)

Particulars Amount
Fixed Assets 5.52
Non-Current Investment 77.07
Long Term Loans and Advances 8.99
Current Assets
Trade Receivables 10.06
Cash and Bank balances 0.03
Short-term loans and advances 158.82
Other current assets 0.05
Total (A) 168.96
Current Liabilities
Trade Payables 2.29
Other Current Liabilities 2.90
Total (B) 5.20
Net Current Assets (A-B) 163.76
Long Term Provisions (0.58)
Short Term Borrowings (0.15)
Net Asset Value 254.61

Non-Current Investment is mainly investment in subsidiaries as mentioned in details of demerged business and short term loan and advances are finance to this subsidiaries companies.

The proposed share entitlement ratio in consideration for the demerger of demerged undertaking would be 1 Equity shares of TSL of Rs 10 each fully paid up for every 2 equity shares of ASL of Rs 10 each fully paid up. And the Appointed date is 31st March 2017.

Table 4: Financials Demerged Business for FY 16 (All Fig. in Rs. Crores)

Details Aurionpro Solutions SPC Auroscient Outsourcing Limited Aurionpro SCM Pte Limited Total
Assets 207.22 111.85 89.02 408.10
Liabilities 131.86 111.56 2.76 246.17
Turnover 101.19 0.90 26.88 128.97
PBT 25.43 -0.05 8.45 33.82
Net Assets 75.37 0.30 86.26 161.92

Rationale

  • Core businesses of Aurionpro Solutions Ltd has achieved the critical size and have reached the stage of self-sustainability and high growth. While the demerged businesses present significant value creation opportunity for shareholders but will need different focused leadership and strategies to maximize the resultant value.
  • The core businesses and demerged businesses have distinct characteristics and are at a different maturity stage in their life cycles. The difference is not only in their revenue cycles but require different sales approach and methodologies, have varied technology shill sets, and hence associated risk profile. Both have a distinct attractiveness to divergent set of investors. To unlock the true potential, the businesses would require undiluted management bandwidth to execute the respective vision. Therefore, it may be prudent that demerged businesses may be transferred into a spate company and whose shares would also be listed on the stock exchange as defined hereto after the demerger.
  • Upon such demerger, Aurionpro Solutions Ltd. would continue to carry on the remaining undertaking and Trejhara Solutions Ltd would continue to carry on the demerged businesses and would have their own independent management teams who can independently chart out their strategies to maximize value creation for their respective stakeholders.
  • It is believed that the proposed demerger will create enhanced value for shareholders and would enable focused strategy in operations, which would be in the best interest of Trejhara Solutions Ltd., Aurionpro Solutions Ltd., their respective shareholders, creditors and all persons connected with the respective companies.

Tax Consequences

This demerger is carried out in compliance to Section 2(19AA) and the said transactions are covered under Section 47(VI b) of the Income Tax Act 1961, hence no tax liability will arise in this case.

Accounting Treatment

  • Resulting company shall record the assets and liabilities pertaining to the demerged undertaking, transferred to and vested in it pursuant to this scheme at their respective book values as appearing in the books of the demerged company.
  • Resulting company shall credit to its share capital in its books of account, the aggregate face value of the equity shares issued by it to its members of the demerged company pursuant to the demerger.
  • On the scheme becoming effective, the equity interest of the demerged company in the equity share capital of the resulting company would get cancelled.
  • The difference being the excess of the net assets value of the demerged company transferred to the resulting company, over the value of new equity shares issued and allotted by the resulting company reduced by the face value of the equity share capital of the Resulting Company cancelled on the scheme being effective would be recorded as Capital Reserve. Shortfall, if any, shall be recorded as Goodwill.
  • Consideration for arrangement discharged by way of issuance of new equity shares shall be recorded at fair value. Equity share capital account shall be credited with the aggregate face value of the new equity shares and preference shares issued by it to the members of transferor company. The fair value of new equity shares issued in excess of the face value of equity shares shall be recorded as securities premium in the financial statements of the Transferee Company.

During the year 2016, the company has made allotment of share warrants and fully paid up equity shares on cash basis to Promoter and Non-Promoter group details of which are as follows:

2016 2017
On 15th October 2015, the Company has allotted 7,40,000 share warrants and 8,00,000 fully paid up equity shares having a nominal value of ` 10 each at a premium of Rs 210 per share and 1,50,000 and 4,85,000 warrants were converted into Equity Shares on 03 April, 2017, and 28 April, 2017, respectively. Remaining 1,05,000 un-exercised warrants were forfeited.
On 27th October 2015, the Company has allotted 5,00,000 share warrants and 1,295,983 fully paid up equity shares having a nominal value of ` 10 each at a premium of Rs 210 per share. 4,50,000 warrants were converted into Equity Shares on 28 April, 2017. Remaining 50,000 un-exercised warrants were forfeited.

Conclusion

Since last few years, the company is trying to refocus on high-end businesses. To transform the company from services provider to high-end technology company, it had sold its IT service business last year and made various strategic acquisitions in order to focus and add up to its core businesses. ASL has a strong business in terms of implementation partner for Oracle They compete with some of the high-end consultants like Accenture, Deloitte and others in terms of the Oracle implementation. Post demerger, the present company continues to concentrate on the business as partner with Oracle.  Other than Oracle they also offer technology solutions through partners such as Microsoft, IBM, ValidSoft, INSYPRUS, etc. will now get transferred to its newly incorporated WOS. Though now there will be two companies with focused top management, real valuation creation for all the stakeholders depends on how they can scale up businesses going forward.

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